Jump in unit labor costs in manufacturing

The combination of a 2.1-percent drop in manufacturing productivity and a 4.7-percent increase in hourly compensation in the first quarter caused the 7.0-percent rise in unit labor costs in manufacturing. The last time unit labor costs increased this much in one quarter was in the first quarter of 1991, when they rose 7.2 percent.

Unit labor costs were up in both parts of manufacturing in the first quarter of 2001. In durable goods industries, they rose 6.5 percent, and, in nondurable goods industries, they rose even more: 8.6 percent.

Unit labor costs—the cost of the labor input required to produce one unit of output—are computed by dividing labor costs in nominal terms by real output. Unit labor costs can also be expressed as the ratio of hourly compensation to labor productivity.